[Q2 2025 Financial Results and Corporate Update](index=1&type=section&id=Q2%202025%20Financial%20Results%20and%20Corporate%20Update) [Key Achievements and Corporate Update](index=1&type=section&id=Key%20Achievements%20and%20Corporate%20Update) KALA BIO completed patient enrollment for the KPI-012 Phase 2b CHASE trial for PCED in Q2 2025, with top-line data expected by late September 2025, and has sufficient cash to fund operations into Q1 2026 - KALA BIO has completed patient enrollment for the KPI-012 Phase 2b CHASE trial for PCED, with top-line data expected by late September 2025[1](index=1&type=chunk)[2](index=2&type=chunk) - As of June 30, 2025, the company's cash resources were **$31.9 million**, projected to support operations until Q1 2026[1](index=1&type=chunk) [Business Highlights and Pipeline Update](index=1&type=section&id=Business%20Highlights%20and%20Pipeline%20Update) [KPI-012 for Persistent Corneal Epithelial Defect (PCED)](index=1&type=section&id=KPI-012%20for%20PCED) KPI-012, KALA's lead product for PCED, has FDA Orphan Drug and Fast Track designations, with its Phase 2b CHASE trial fully enrolled and top-line data expected by late September 2025, potentially serving as a pivotal trial for BLA submission - KPI-012 has received FDA Orphan Drug and Fast Track designations for PCED, a condition affecting approximately **100,000 patients** in the US with significant market potential[5](index=5&type=chunk) - The CHASE Phase 2b clinical trial has completed enrollment of **79 patients**, with top-line data anticipated by late September 2025, potentially serving as a pivotal trial to support a BLA[5](index=5&type=chunk) [Other Pipeline Candidates and Platform Technology](index=1&type=section&id=Other%20Pipeline%20Candidates%20and%20Platform%20Technology) KALA's MSC-S platform technology offers a multifactorial mechanism for developing therapies for various rare ocular diseases, with KPI-014 as a preclinical program for inherited retinal degenerative diseases and KPI-012 exploring potential for Limbal Stem Cell Deficiency (LSCD) - KALA's proprietary Mesenchymal Stem Cell Secretome (MSC-S) platform technology features a multifactorial mechanism of action, enabling the development of product candidates for various rare ocular diseases[3](index=3&type=chunk)[4](index=4&type=chunk) - KPI-014 is a preclinical program targeting inherited retinal degenerative diseases, such as retinitis pigmentosa and Stargardt disease, utilizing a gene-agnostic approach[6](index=6&type=chunk) - The company is exploring the potential of KPI-012 to treat other rare anterior segment diseases, including Limbal Stem Cell Deficiency (LSCD), which is estimated to affect **100,000 patients** in the US[10](index=10&type=chunk) [Key Opinion Leader (KOL) Event](index=1&type=section&id=KOL%20Event) KALA hosted a KOL webinar in July 2025, where experts highlighted the unmet needs of PCED patients and the potential of KPI-012's multifactorial mechanism of action - In July 2025, KALA hosted a KOL webinar where leading corneal experts emphasized the unmet needs of PCED patients and the potential of KPI-012's multifactorial mechanism of action[2](index=2&type=chunk)[10](index=10&type=chunk) [Financial Results](index=2&type=section&id=Financial%20Results) [Cash Position and Financial Runway](index=2&type=section&id=Cash%20Position%20and%20Financial%20Runway) As of June 30, 2025, KALA's cash and cash equivalents were **$31.9 million**, a decrease from **$42.2 million** on March 31, primarily due to operations and debt repayment, with existing cash expected to fund operations into Q1 2026 | Metric | June 30, 2025 (USD Millions) | March 31, 2025 (USD Millions) | Change (USD Millions) | | :--- | :---: | :---: | :---: | | Cash and Cash Equivalents | 31.9 | 42.2 | -10.3 | - The cash decrease was primarily due to cash used in operations and a **$2.5 million** prepayment of debt principal and fees[7](index=7&type=chunk) - Cash resources as of June 30, 2025, are projected to support operations until Q1 2026[7](index=7&type=chunk) [Financial Results for the Three Months Ended June 30, 2025](index=2&type=section&id=Three%20Months%20Ended%20June%2030,%202025) In Q2 2025, KALA experienced increases in both G&A and R&D expenses, leading to expanded operating and net losses | Metric (USD Thousands) | Q2 2025 | Q2 2024 | Year-over-Year Change | | :--- | :---: | :---: | :---: | | G&A Expenses | 4,643 | 4,317 | +7.55% | | R&D Expenses | 6,232 | 5,317 | +17.21% | | Loss (Gain) on Fair Value Remeasurement of Contingent Consideration | 153 (Loss) | (29) (Gain) | Significant Change | | Operating Loss | (11,028) | (9,605) | +14.81% | | Net Loss | (11,155) | (9,579) | +16.45% | | Net Loss Per Share (Diluted) | (1.71) | (3.16) | -45.89% | | Weighted Average Shares Outstanding | 6,513,108 | 3,030,213 | +115% | - G&A expenses increased primarily due to higher stock-based compensation expense, while R&D expenses rose due to increased personnel-related costs and KPI-012 development costs[11](index=11&type=chunk) [Financial Results for the Six Months Ended June 30, 2025](index=2&type=section&id=Six%20Months%20Ended%20June%2030,%202025) In H1 2025, KALA saw a slight decrease in G&A expenses, an increase in R&D expenses, stable operating loss year-over-year, and a narrowed net loss | Metric (USD Thousands) | H1 2025 | H1 2024 | Year-over-Year Change | | :--- | :---: | :---: | :---: | | G&A Expenses | 9,236 | 9,739 | -5.27% | | R&D Expenses | 12,287 | 11,668 | +5.30% | | Loss on Fair Value Remeasurement of Contingent Consideration | 174 (Loss) | 129 (Loss) | +34.88% | | Operating Loss | (21,697) | (21,536) | +0.75% | | Net Loss | (20,102) | (21,386) | -6.00% | | Net Loss Per Share (Diluted) | (3.13) | (7.32) | -57.24% | | Weighted Average Shares Outstanding | 6,429,950 | 2,921,712 | +120% | - H1 G&A expenses decreased primarily due to lower personnel-related costs, while R&D expenses increased due to higher personnel-related costs and KPI-012 development costs[9](index=9&type=chunk)[14](index=14&type=chunk) [Balance Sheet Data](index=5&type=section&id=Balance%20Sheet%20Data) As of June 30, 2025, KALA reported **$31.942 million** in cash and cash equivalents, **$36.053 million** in total assets, and a **negative $3.206 million** in total stockholders' equity | Metric (USD Thousands) | June 30, 2025 | December 31, 2024 | Change | | :--- | :---: | :---: | :---: | | Cash and Cash Equivalents | 31,942 | 51,181 | -19,239 | | Total Assets | 36,053 | 55,483 | -19,430 | | Working Capital | 17,647 | 35,841 | -18,194 | | Current Portion of Long-Term Debt | 9,511 | 10,336 | -825 | | Long-Term Debt, Net of Discount | 18,786 | 20,102 | -1,316 | | Other Long-Term Liabilities | 4,457 | 6,093 | -1,636 | | Total Stockholders' (Deficit) Equity | (3,206) | 12,332 | -15,538 | - As of June 30, 2025, the company's stockholders' equity turned into a deficit, reflecting a decrease in assets and relatively stable liabilities[17](index=17&type=chunk) [Consolidated Statement of Operations](index=6&type=section&id=Consolidated%20Statement%20of%20Operations) This section details KALA's operating expenses, profit and loss, and net loss per share for Q2 and H1 2025 | Metric (USD Thousands) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :---: | :---: | :---: | :---: | | G&A Expenses | 4,643 | 4,317 | 9,236 | 9,739 | | R&D Expenses | 6,232 | 5,317 | 12,287 | 11,668 | | Loss (Gain) on Fair Value Remeasurement of Contingent Consideration | 153 | (29) | 174 | 129 | | Total Operating Expenses | 11,028 | 9,605 | 21,697 | 21,536 | | Operating Loss | (11,028) | (9,605) | (21,697) | (21,536) | | Interest Income | 407 | 504 | 870 | 1,008 | | Interest Expense | (1,081) | (1,458) | (2,172) | (2,913) | | Grant Income | 547 | 980 | 2,897 | 2,055 | | Total Other Income (Expense) | (127) | 26 | 1,595 | 150 | | Net Loss | (11,155) | (9,579) | (20,102) | (21,386) | | Net Loss Per Share (Diluted) | (1.71) | (3.16) | (3.13) | (7.32) | | Weighted Average Shares Outstanding | 6,513,108 | 3,030,213 | 6,429,950 | 2,921,712 | [About KALA BIO, Inc.](index=3&type=section&id=About%20KALA%20BIO,%20Inc.) KALA BIO is a clinical-stage biopharmaceutical company focused on rare and severe ocular diseases, developing biologic therapies using its proprietary Mesenchymal Stem Cell Secretome (MSC-S) platform - KALA BIO is a clinical-stage biopharmaceutical company focused on rare and severe ocular diseases, developing biologic therapies using its proprietary Mesenchymal Stem Cell Secretome (MSC-S) platform[12](index=12&type=chunk) - The company's lead product candidate, KPI-012, a human MSC-S, is in clinical development for PCED and has received FDA Orphan Drug and Fast Track designations[12](index=12&type=chunk) - KALA is also exploring KPI-012's potential for Limbal Stem Cell Deficiency and other rare corneal diseases, and has initiated preclinical studies for its MSC-S platform in retinal degenerative diseases[12](index=12&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This press release contains forward-looking statements regarding KALA's future expectations, plans, and prospects, including KPI-012's potential benefits, CHASE trial timelines, BLA submission likelihood, other indication development, and cash runway sufficiency - This press release contains forward-looking statements regarding KALA's future expectations, plans, and prospects, including KPI-012's potential benefits, CHASE trial timelines, BLA submission likelihood, other indication development, and cash runway sufficiency[13](index=13&type=chunk) - Actual results may differ materially from forward-looking statements due to various important factors such as clinical trial uncertainties, regulatory approvals, key personnel retention, and financing needs[13](index=13&type=chunk) - KALA undertakes no obligation to update any forward-looking statements, except as required by law[15](index=15&type=chunk)

Core Insights - KALA BIO, Inc. is focused on developing innovative therapies for rare and severe eye diseases, with a pivotal second quarter marked by the completion of patient enrollment in the Phase 2b CHASE trial for KPI-012 targeting Persistent Corneal Epithelial Defect (PCED) [2][5][13] - The company anticipates topline results from the CHASE trial by the end of September 2025, which could support a Biologics License Application (BLA) to the FDA, contingent on positive outcomes [2][7] - KALA's lead product candidate, KPI-012, has received Orphan Drug and Fast Track designations from the FDA, highlighting its potential in addressing a significant unmet medical need for approximately 100,000 patients with PCED in the U.S. [5][9] Financial Performance - As of June 30, 2025, KALA reported cash and cash equivalents of $31.9 million, down from $42.2 million as of March 31, 2025, primarily due to operational expenses and a $2.5 million debt prepayment [9][15] - For the second quarter of 2025, KALA's general and administrative expenses were $4.6 million, an increase from $4.3 million in the same period of 2024, mainly due to higher stock-based compensation [12][17] - Research and development expenses for the same quarter were $6.2 million, up from $5.3 million in 2024, reflecting increased employee-related costs and KPI-012 development expenses [12][17] Clinical Development - The CHASE trial enrolled 79 patients across 37 sites in the U.S. and Latin America, with the primary efficacy analysis focusing on verified PCED cases [7] - KALA is also exploring KPI-012 for other rare ocular diseases, including Limbal Stem Cell Deficiency (LSCD), which similarly presents a substantial market opportunity with an estimated 100,000 patients in the U.S. [8] - The company is advancing KPI-014, a preclinical program targeting inherited retinal degenerative diseases, which may offer a gene-agnostic treatment approach [8][13]

Company Overview - KALA BIO, Inc. is a clinical-stage biopharmaceutical company focused on innovative therapies for rare and severe eye diseases [3] - The company utilizes a proprietary mesenchymal stem cell secretome (MSC-S) platform for its investigational therapies [3] Product Development - KALA's lead product candidate, KPI-012, is designed to address persistent corneal epithelial defect (PCED) and has received Orphan Drug and Fast Track designations from the U.S. FDA [3] - The company is also exploring KPI-012 for Limbal Stem Cell Deficiency and other rare corneal diseases that threaten vision [3] - Preclinical studies are underway to evaluate the MSC-S platform's potential for treating retinal degenerative diseases, including Retinitis Pigmentosa and Stargardt Disease [3] Upcoming Events - KALA management will present at the H.C. Wainwright 5th Annual Ophthalmology Virtual Conference on August 13, 2025 [1] - A pre-recorded presentation will be available starting at 7:00 a.m. ET on the same day [1] - Management will participate in a panel discussion on "Novel Treatments for Front-of-the-Eye Indications" at 1:00 p.m. ET [1] - Virtual one-on-one meetings will be available throughout the conference [1]

Core Insights - New analyst coverage is essential in navigating heightened economic uncertainty, providing updated insights into company fundamentals and risk exposures [2][3] - Recent initiations of coverage on companies like KALA BIO, Graham Corporation, Arq, and Hawkins reflect the growing need for sharper analysis amid inflationary pressures and weakening demand [3][10] Analyst Coverage Importance - Analysts possess specialized knowledge that offers critical insights into a company's financial health, growth potential, and industry trends, which are often difficult for individual investors to acquire independently [4] - New coverage typically indicates a higher investor inclination towards a stock, as it suggests that the company holds potential value [5][7] Value Creation by Analysts - Analysts create value for companies by initiating coverage, acting as intermediaries with extensive access to relevant data, which helps mitigate inefficiencies in the market [6] - Stocks chosen for new coverage usually reflect a positive outlook envisioned by analysts, often leading to more favorable ratings compared to continuously covered stocks [7][8] Market Impact of New Coverage - New analyst coverage can lead to immediate stock price volatility, with positive ratings attracting bullish sentiment and driving share prices higher, while negative ratings may trigger sell-offs [9] - Favorable coverage from multiple analysts can enhance investor confidence, leading to sustained upward momentum in stock valuations [9] Recent Stock Performances - KALA BIO shares increased by 96.1% over the past three months, with a narrowing loss per share estimate for 2025 [10][15] - Graham Corporation shares rose by 75.2% in the same period, with an increasing EPS estimate for fiscal 2026 [10][16] - Arq shares gained 57%, with an unchanged EPS estimate indicating improvement from the previous year's loss [10][17] - Hawkins shares saw a 25.6% increase, despite an unchanged EPS estimate indicating a year-over-year decline [10][18] Screening Criteria for Investment - Stocks with increased analyst coverage and improving average ratings are prioritized, alongside other parameters such as price and average daily volume [12][13]

Core Insights - KALA BIO, Inc. has completed patient enrollment in the CHASE Phase 2b clinical trial for KPI-012, aimed at treating persistent corneal epithelial defect (PCED) [1][3] - The trial is a multicenter, randomized, double-masked, vehicle-controlled study evaluating the safety and efficacy of two doses of KPI-012 [2] - KALA expects to report topline data by the end of Q3 2025, with the potential for the CHASE trial to support a Biologics License Application (BLA) submission contingent on positive results [1][3] Company Overview - KALA BIO is a clinical-stage biopharmaceutical company focused on innovative therapies for rare and severe eye diseases [4] - The lead product candidate, KPI-012, is based on a proprietary mesenchymal stem cell secretome (MSC-S) platform and has received Orphan Drug and Fast Track designations from the FDA for PCED [4] - The company is also exploring KPI-012 for other indications, including Limbal Stem Cell Deficiency and retinal degenerative diseases [4]

ARLINGTON, Mass., July 07, 2025 (GLOBE NEWSWIRE) -- KALA BIO, Inc. (NASDAQ:KALA), a clinical-stage biopharmaceutical company dedicated to the research, development and commercialization of innovative therapies for rare and severe diseases of the eye, today announced that the Company will host a webcast event with Key Opinion Leaders (KOLs) to discuss the potential of KPI-012 for the treatment of persistent corneal epithelial defect (PCED). The event will take place on Wednesday, July 16, 2025, at 4:00 p.m. ...

Summary of KALA BIO (KALA) 2025 Conference Call Company Overview - KALA BIO is a leader in the emerging field of mesenchymal stem cell secretomes, focusing on rare ophthalmic diseases [1] Industry and Market Opportunity - The ongoing pivotal trial for KALA's lead product, KPI O One Two, targets persistent corneal epithelial defects (PCED), a rare and vision-threatening condition with significant unmet needs [2] - The only approved product in this space, Oxervate, had sales of approximately $820 million in 2023 and is speculated to have exceeded $1 billion in sales [2] - KALA's product aims to cover a broader indication for PCED, addressing not only the one-third of patients treated by Oxervate but also the additional two-thirds with other etiologies [2][12] Product Development and Mechanism of Action - KPI O One Two utilizes a multifactorial mechanism of action, which includes wound healing, tissue repair, anti-inflammatory, and neuroprotective effects [6] - The product is derived from human bone marrow-derived mesenchymal stem cells, manufactured under GMP conditions to produce a variety of biomolecules [5] - The formulation is designed for easy patient administration, contrasting with Oxervate's complex dosing regimen [14] Clinical Trials and Results - KALA has received orphan drug and fast track designations from the FDA for KPI O One Two [7] - A phase one b clinical trial showed that 6 out of 8 patients experienced complete healing of their lesions, with significant pain reduction observed [24][28] - The pivotal trial is designed to demonstrate efficacy through complete healing of lesions at 8 weeks, with top-line data expected by the end of Q3 [36][38] Competitive Advantages - KALA's product is positioned to address a significant market gap, as Oxervate is only indicated for neurotrophic keratitis, leaving two-thirds of PCED patients without approved therapies [12][44] - The product's simpler dosing and administration method is expected to improve patient compliance and experience [14][15] Regulatory and Development Strategy - KALA has engaged with the FDA, receiving positive feedback on their clinical trial design and potency assay program [33][30] - The current study involves a multicenter randomized trial with a target of 90 patients, with plans to expand enrollment to ensure robust data [39][41] Key Takeaways - KALA BIO is targeting a significant unmet need in the ophthalmic market with its innovative product KPI O One Two, which has shown promising early clinical results and is positioned to capture a large patient population [2][24][44] - The company is well-prepared for regulatory engagement and has a clear path forward for its clinical development program [30][33]

Company Overview - KALA BIO, Inc. is a clinical-stage biopharmaceutical company focused on innovative therapies for rare and severe eye diseases [3] - The company utilizes a proprietary mesenchymal stem cell secretome (MSC-S) platform for its investigational therapies [3] Product Development - KALA's lead product candidate, KPI-012, is designed to address persistent corneal epithelial defect (PCED), a rare disease related to impaired corneal healing [3] - KPI-012 has received Orphan Drug and Fast Track designations from the U.S. Food and Drug Administration [3] - The company is also exploring KPI-012 for Limbal Stem Cell Deficiency and other rare corneal diseases that threaten vision [3] - Preclinical studies are underway to evaluate the MSC-S platform's potential for treating retinal degenerative diseases, including Retinitis Pigmentosa and Stargardt Disease [3] Upcoming Events - KALA management will present at the Jefferies Global Healthcare Conference on June 5, 2025, at 1:25 p.m. ET [1] - One-on-one meetings will also be available on the same day [1]

[PART I – FINANCIAL INFORMATION](index=7&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=7&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements and accompanying notes for Q1 2025 and Q4 2024 [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20March%2031%2C%202025%20and%20December%2031%2C%202024) Balance sheets show decreased total assets and stockholders' equity from Q4 2024 to Q1 2025, primarily due to reduced cash and an accumulated deficit | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Cash and cash equivalents | $42,222 | $51,181 | $(8,959) | | Total current assets | $45,717 | $52,797 | $(7,080) | | Total assets | $48,252 | $55,483 | $(7,231) | | Total current liabilities | $22,975 | $16,956 | $6,019 | | Total liabilities | $42,544 | $43,151 | $(607) | | Accumulated deficit | $(676,867) | $(667,920) | $(8,947) | | Total stockholders' equity | $5,708 | $12,332 | $(6,624) | [Condensed Consolidated Statement of Operations and Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statement%20of%20Operations%20and%20Comprehensive%20Loss%20for%20the%20three%20months%20ended%20March%2031%2C%202025%20and%202024) Net loss decreased in Q1 2025 compared to Q1 2024, primarily due to lower operating expenses and higher grant income | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | General and administrative expenses | $4,593 | $5,422 | $(829) | | Research and development expenses | $6,055 | $6,351 | $(296) | | Total costs and expenses | $10,669 | $11,931 | $(1,262) | | Loss from operations | $(10,669) | $(11,931) | $1,262 | | Interest income | $463 | $504 | $(41) | | Interest expense | $(1,091) | $(1,455) | $364 | | Grant income | $2,350 | $1,075 | $1,275 | | Net loss | $(8,947) | $(11,807) | $2,860 | | Net loss per share (basic and diluted) | $(1.41) | $(4.20) | $2.79 | [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20for%20the%20three%20months%20ended%20March%2031%2C%202025%20and%202024) Stockholders' equity decreased from $12.3 million in Q4 2024 to $5.7 million in Q1 2025, mainly due to net loss, partially offset by stock-based compensation | Metric | Balance as of Dec 31, 2024 (in thousands) | Net Loss (in thousands) | Stock-based Compensation (in thousands) | Balance as of Mar 31, 2025 (in thousands) | | :----------------------- | :------------------------------------ | :---------------------- | :-------------------------------------- | :------------------------------------ | | Additional paid-in capital | $680,246 | N/A | $2,310 | $682,569 | | Accumulated deficit | $(667,920) | $(8,947) | N/A | $(676,867) | | Total stockholders' equity | $12,332 | $(8,947) | $2,310 | $5,708 | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20three%20months%20ended%20March%2031%2C%202025%20and%202024) Net cash used in operating activities decreased in Q1 2025, while financing activities shifted from providing to using cash, resulting in a larger net decrease in cash | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Net cash used in operating activities | $(8,824) | $(10,844) | $2,020 | | Net cash used in investing activities | $0 | $(13) | $13 | | Net cash (used in) provided by financing activities | $(135) | $8,440 | $(8,575) | | Net decrease in cash and cash equivalents | $(8,959) | $(2,417) | $(6,542) | | Cash and cash equivalents at end of period | $42,222 | $48,478 | $(6,256) | [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed disclosures on business, accounting policies, financial instruments, grant income, and other financial statement items [Note 1. Nature of Business and Basis of Presentation](index=14&type=section&id=Note%201.%20Nature%20of%20Business%20and%20Basis%20of%20Presentation) KALA BIO is a clinical-stage biopharmaceutical company focused on rare eye diseases, with KPI-012 as its lead candidate, facing going concern doubts due to significant losses - KALA BIO, Inc. is a clinical-stage biopharmaceutical company focused on rare and severe diseases of the front and back of the eye. Its lead product candidate, KPI-012, is in Phase 2b clinical trial for persistent corneal epithelial defects (PCED) and has received Orphan Drug and Fast Track designations from the FDA[30](index=30&type=chunk)[31](index=31&type=chunk)[112](index=112&type=chunk)[115](index=115&type=chunk) - The company sold its commercial business (EYSUVIS and INVELTYS) to Alcon in July 2022 for an upfront payment of **$60 million** and is eligible to receive up to **$325 million** in commercial-based sales milestone payments. No milestone payments have been received to date[32](index=32&type=chunk)[118](index=118&type=chunk)[150](index=150&type=chunk) - The company has incurred significant losses and negative cash flows since inception, with an accumulated deficit of **$676.9 million** as of March 31, 2025. Management has concluded there is substantial doubt about its ability to continue as a going concern beyond Q1 2026 without additional funding[34](index=34&type=chunk)[35](index=35&type=chunk)[37](index=37&type=chunk)[119](index=119&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=19&type=section&id=Note%202.%20Summary%20of%20Significant%20Accounting%20Policies) Financial statements adhere to U.S. GAAP; no material changes to accounting policies occurred in Q1 2025, with a new ASU not expected to have a material impact - The company's condensed consolidated financial statements are prepared in accordance with U.S. GAAP, with certain information condensed or omitted as permitted by SEC rules for interim reports[43](index=43&type=chunk) - There have been no material changes to the company's significant accounting policies during the three months ended March 31, 2025[46](index=46&type=chunk) - FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures, effective for annual periods beginning after December 15, 2026, which is not expected to have a material impact on the company's financial statements[45](index=45&type=chunk) [Note 3. Fair Value of Financial Instruments](index=19&type=section&id=Note%203.%20Fair%20Value%20of%20Financial%20Instruments) Financial instruments include cash equivalents (Level 1) and contingent consideration (Level 3), with a reduced loss on remeasurement for contingent liabilities in Q1 2025 - The company's financial instruments primarily consist of cash equivalents (Level 1) and contingent consideration (Level 3)[47](index=47&type=chunk)[52](index=52&type=chunk) - Contingent consideration liabilities, stemming from the Combangio Acquisition, are measured at fair value using Level 3 unobservable inputs (probability-adjusted discounted cash flow model)[51](index=51&type=chunk)[53](index=53&type=chunk) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Loss on fair value remeasurement of contingent consideration | $21 | $158 | $(137) | [Note 4. Grant Income](index=22&type=section&id=Note%204.%20Grant%20Income) Combangio received a $15 million CIRM grant for KPI-012, with $8.02 million disbursed by March 2025, and grant income significantly increased in Q1 2025 - Combangio, a wholly-owned subsidiary, entered into a **$15 million** grant agreement with CIRM to support the KPI-012 program for PCED[54](index=54&type=chunk) - As of March 31, 2025, **$8.02 million** in disbursements have been received from CIRM, including **$2.26 million** in April 2025. The remaining **$1.08 million** is contingent on achieving specified milestones[54](index=54&type=chunk)[36](index=36&type=chunk) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :---------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Grant income | $2,350 | $1,075 | $1,275 | [Note 5. Prepaid Expenses and Other Current Assets](index=23&type=section&id=Note%205.%20Prepaid%20Expenses%20and%20Other%20Current%20Assets) Prepaid expenses and other current assets increased to $3.495 million in Q1 2025, primarily due to a $2.26 million CIRM receivable | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | CIRM receivable | $2,260 | $0 | $2,260 | | Insurance | $372 | $636 | $(264) | | Prepaid research and development | $275 | $463 | $(188) | | Total prepaid expenses and other current assets | $3,495 | $1,616 | $1,879 | [Note 6. Accrued Expenses and Other Current Liabilities](index=23&type=section&id=Note%206.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) Accrued expenses and other current liabilities decreased to $4.038 million in Q1 2025, mainly due to a reduction in compensation and benefits | Metric | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Compensation and benefits | $1,033 | $2,390 | $(1,357) | | Development costs | $930 | $736 | $194 | | Contract manufacturing | $800 | $672 | $128 | | Total accrued expenses and other current liabilities | $4,038 | $4,975 | $(937) | [Note 7. Leases](index=24&type=section&id=Note%207.%20Leases) The company leases office, lab, and R&D space in Menlo Park, California, with operating lease costs consistent at $149 thousand in Q1 2025 - The company leases approximately 6,135 square feet of office, laboratory, and R&D space in Menlo Park, California, with an initial term of 62 months commencing July 1, 2023[59](index=59&type=chunk) | Metric | March 31, 2025 | December 31, 2024 | | :-------------------------- | :------------- | :---------------- | | Weighted average remaining lease term | 3.4 years | 3.7 years | | Weighted average discount rate | 13.1% | 13.1% | | Lease Cost | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :----------------- | :--------------------------------------------- | :--------------------------------------------- | | Operating lease cost | $149 | $149 | | Total lease cost | $228 | $217 | [Note 8. Debt](index=25&type=section&id=Note%208.%20Debt) The company has $29.3 million outstanding on a term loan with Oxford Finance, with extended amortization and maturity dates following a $5 million prepayment - The company has a term loan of **$29.3 million** outstanding with Oxford Finance, bearing a floating interest rate (greater of 8.00% or 1-Month CME Term SOFR + 0.10% + 7.89%)[80](index=80&type=chunk)[65](index=65&type=chunk) - Following a **$5 million** prepayment in December 2024, the amortization date was extended to July 1, 2025, and the maturity date to November 1, 2026. An additional **$2.5 million** prepayment by June 30, 2025, could further extend these dates[74](index=74&type=chunk)[75](index=75&type=chunk) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :---------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Interest expense | $1,091 | $1,455 | $(364) | [Note 9. Warrants](index=29&type=section&id=Note%209.%20Warrants) As of March 31, 2025, the company had 3,983 common stock warrants outstanding, exercisable at $413.50 and $609.23 per share | Issued Year | Exercise Price Per Share | Expiration Date | Shares Exercisable at March 31, 2025 | | :---------- | :----------------------- | :-------------- | :----------------------------------- | | 2016 | $413.50 | October 2026 | 290 | | 2018 | $609.23 | October 2025 | 3,693 | | Total | | | 3,983 | [Note 10. Equity Financings](index=29&type=section&id=Note%2010.%20Equity%20Financings) The company raised capital through registered offerings and private placements, generating $7.036 million net from at-the-market offerings and $33.849 million gross from private placements - The company has a **$350 million** shelf registration (2023 Shelf Registration) for various securities, including common stock, and has raised **$7.036 million** in net proceeds from at-the-market offerings under this registration from January 2023 to March 2025[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) | Private Placement Date | Securities Issued | Gross Proceeds (in thousands) | | :--------------------- | :---------------- | :---------------------------- | | December 21, 2023 | Series F Preferred Stock | $2,000 | | March 25, 2024 | Series G Preferred Stock | $8,600 | | June 26, 2024 | Common Stock & Series H Preferred Stock | $12,499 | | December 29, 2024 | Common Stock & Series I Preferred Stock | $10,750 | | Total | | $33,849 | [Note 11. Stock-Based Compensation](index=31&type=section&id=Note%2011.%20Stock-Based%20Compensation) Stockholders approved an amended 2017 Equity Incentive Plan, increasing authorized shares, with Q1 2025 stock-based compensation expense at $2.31 million - The company's Amended and Restated 2017 Equity Incentive Plan was approved in June 2023, increasing authorized shares by **1,250,000**. As of March 31, 2025, **231,816** shares were available for grant[92](index=92&type=chunk)[93](index=93&type=chunk) | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Stock-based compensation expense | $2,310 | $2,376 | $(66) | [Note 12. Loss Per Share](index=32&type=section&id=Note%2012.%20Loss%20Per%20Share) Basic and diluted net loss per share improved to $(1.41) in Q1 2025 from $(4.20) in Q1 2024, with dilutive equivalents excluded due to net loss | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Change | | :------------------------------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Net loss per share attributable to common stockholders—basic and diluted | $(1.41) | $(4.20) | $2.79 | | Weighted average shares outstanding—basic and diluted | 6,345,869 | 2,813,210 | 3,532,659 | - Potential common stock equivalents (options, RSUs, warrants, convertible preferred stock) were excluded from diluted EPS calculation for both periods due to their anti-dilutive effect during net loss periods[42](index=42&type=chunk)[98](index=98&type=chunk) [Note 13. Income Taxes](index=32&type=section&id=Note%2013.%20Income%20Taxes) No income tax provision or benefit was recorded in Q1 2025 or Q1 2024, with a full valuation allowance maintained against deferred tax assets due to cumulative losses - The company did not record a provision or benefit for income taxes in Q1 2025 or Q1 2024 and maintains a full valuation allowance for its U.S. federal and state deferred tax assets due to a history of cumulative net losses[99](index=99&type=chunk)[100](index=100&type=chunk) - An ownership change in December 2022 limited the annual utilization of net operating loss carryforwards to **$222 thousand**[101](index=101&type=chunk) [Note 14. Commitments and Contingencies](index=33&type=section&id=Note%2014.%20Commitments%20and%20Contingencies) The company has a license agreement with Stanford University for KPI-012 and contingent consideration liabilities from the Combangio acquisition, totaling up to $105 million in potential milestones - The company has a worldwide, exclusive, sublicensable license agreement with Stanford University for patent rights related to KPI-012, requiring annual license maintenance fees and potential milestone/tiered royalty payments[104](index=104&type=chunk) - Contingent consideration liabilities from the Combangio Acquisition include potential future payments of up to **$40 million** for development, regulatory, and commercialization milestones, and up to **$65 million** for sales-based milestones[106](index=106&type=chunk) - Following the First Dosing Milestone in February 2023, the company paid **$2.5 million** in cash and **$2.354 million** in common stock to former Combangio Equityholders[106](index=106&type=chunk) [Note 15. Segment](index=34&type=section&id=Note%2015.%20Segment) The company operates as a single segment focused on innovative eye disease therapies, with net loss used by CODM to assess performance and allocate resources - The company manages its operations as one operating and reportable segment, focused on developing and commercializing innovative therapies for rare and severe eye diseases[107](index=107&type=chunk) - The Chief Operating Decision Maker (CODM) uses net loss to analyze cash flows, assess segment performance, and allocate resources[108](index=108&type=chunk) | Expense Category | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | | KPI-012 development costs | $2,807 | $3,047 | | Employee-related costs for R&D personnel | $2,932 | $2,868 | | General and administrative | $4,593 | $5,422 | | Net loss | $(8,947) | $(11,807) | [Note 16. Subsequent Event](index=35&type=section&id=Note%2016.%20Subsequent%20Event) In April 2025, the company entered into employee retention agreements totaling $1.709 million, contingent on continued employment or CHASE trial data announcement - In April 2025, the company paid **$1.709 million** in cash for employee retention agreements[109](index=109&type=chunk) - Retention payments are subject to repayment if employment is terminated voluntarily or for cause before September 30, 2025, or the public announcement of CHASE clinical trial topline data[109](index=109&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=29&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, Q1 2025 performance, liquidity, and future funding needs, emphasizing KPI-012 development and going concern challenges - The company has historically financed operations through proceeds from the sale of its commercial business, IPOs, at-the-market offerings, private placements, debt, and CIRM grants[148](index=148&type=chunk) - As of March 31, 2025, cash and cash equivalents were **$42.2 million**, and indebtedness was **$29.3 million**[172](index=172&type=chunk) - Existing cash and cash equivalents are expected to fund operations into Q1 2026, but additional funding is required to complete KPI-012 clinical development, leading to substantial doubt about the company's ability to continue as a going concern[180](index=180&type=chunk)[181](index=181&type=chunk) [Overview](index=36&type=section&id=Overview) KALA BIO is a clinical-stage biopharmaceutical company focused on rare eye diseases, with KPI-012 in Phase 2b trials, facing significant losses and an accumulated deficit - KALA BIO is a clinical-stage biopharmaceutical company developing innovative therapies for rare and severe eye diseases[112](index=112&type=chunk) - KPI-012, a mesenchymal stem cell secretome (MSC-S), is in a Phase 2b clinical trial (CHASE trial) for persistent corneal epithelial defects (PCED), with topline safety and efficacy data expected in Q3 2025. It has FDA Orphan Drug and Fast Track designations[112](index=112&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk) - The company is also evaluating KPI-012 for Limbal Stem Cell Deficiency and has initiated preclinical studies for KPI-014 for inherited retinal degenerative diseases[115](index=115&type=chunk)[116](index=116&type=chunk) - The company sold its commercial business (EYSUVIS and INVELTYS) to Alcon in July 2022 and has incurred significant operating losses and negative cash flows, with an accumulated deficit of **$676.9 million** as of March 31, 2025[118](index=118&type=chunk)[119](index=119&type=chunk) [Financial Operations Overview](index=38&type=section&id=Financial%20Operations%20Overview) This section details financial operations, including comparable G&A and R&D expenses, decreased contingent consideration loss, stable interest income, reduced interest expense, and increased grant income - General and administrative expenses are expected to be comparable to 2024 levels, with substantial increases anticipated upon marketing approval and commercialization of KPI-012[123](index=123&type=chunk) - Research and development expenses are expected to be comparable to 2024, driven by the clinical development of KPI-012 (CHASE trial) and preclinical studies for KPI-014[125](index=125&type=chunk) - Loss on fair value remeasurement of contingent consideration decreased from **$0.2 million** in Q1 2024 to less than **$0.1 million** in Q1 2025, primarily due to changes in discount rates and expected timing of milestone payments[144](index=144&type=chunk) - Interest income remained stable at **$0.5 million** for both Q1 2025 and Q1 2024. Interest expense decreased from **$1.5 million** in Q1 2024 to **$1.1 million** in Q1 2025, reflecting lower outstanding debt[145](index=145&type=chunk)[146](index=146&type=chunk) - Grant income increased significantly from **$1.1 million** in Q1 2024 to **$2.4 million** in Q1 2025, due to the achievement of specified milestones under the CIRM Award and associated costs for the CHASE trial[147](index=147&type=chunk) [Critical Accounting Policies and Significant Judgments and Estimates](index=44&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) Financial statements rely on estimates for lease liabilities, stock-based compensation, contingent consideration, and deferred tax assets, with no material changes from the prior annual report - The preparation of financial statements requires management to make estimates and assumptions, including for lease liabilities, stock-based compensation, contingent consideration, and deferred tax assets[139](index=139&type=chunk) - No material changes to critical accounting estimates were reported from the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[140](index=140&type=chunk) [Results of Operations](index=44&type=section&id=Results%20of%20Operations) This section details Q1 2025 financial results compared to Q1 2024, showing a reduced net loss driven by lower operating expenses and increased grant income [Comparison of the Three Months Ended March 31, 2025 and 2024](index=44&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20March%2031%2C%202025%20and%202024) Net loss decreased by $2.86 million in Q1 2025 due to lower operating expenses and increased grant income, partially offset by slightly lower interest income | Metric | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | General and administrative | $4,593 | $5,422 | $(829) | | Research and development | $6,055 | $6,351 | $(296) | | Loss on fair value remeasurement of contingent consideration | $21 | $158 | $(137) | | Total operating expenses | $10,669 | $11,931 | $(1,262) | | Loss from operations | $(10,669) | $(11,931) | $1,262 | | Interest income | $463 | $504 | $(41) | | Interest expense | $(1,091) | $(1,455) | $364 | | Grant income | $2,350 | $1,075 | $1,275 | | Net loss | $(8,947) | $(11,807) | $2,860 | - General and administrative expenses decreased by **$0.8 million**, primarily due to a **$0.7 million** decrease in employee-related costs and a **$0.1 million** decrease in stock-based compensation[142](index=142&type=chunk) - Research and development expenses decreased by **$0.3 million**, mainly due to a **$0.2 million** decrease in medical affairs related KPI-012 development costs and a **$0.1 million** decrease in other R&D costs[143](index=143&type=chunk) - Grant income increased by **$1.275 million**, from **$1.075 million** in Q1 2024 to **$2.350 million** in Q1 2025, driven by the achievement of CIRM Award milestones[147](index=147&type=chunk) [Liquidity and Capital Resources](index=46&type=section&id=Liquidity%20and%20Capital%20Resources) The company finances operations through equity, debt, and grants, with $42.2 million cash expected to fund into Q1 2026, but additional funding is needed, raising going concern doubts [Sale of Commercial Business](index=48&type=section&id=Sale%20of%20Commercial%20Business) In July 2022, the company sold its commercial business to Alcon for an upfront payment and is eligible for up to $325 million in sales-based milestones, with no payments received to date - In July 2022, the company sold its Commercial Business (EYSUVIS and INVELTYS) to Alcon for an upfront cash payment of **$60 million**[150](index=150&type=chunk) - The company is eligible to receive up to **$325 million** in four commercial-based sales milestone payments from Alcon, contingent on aggregate worldwide net sales of EYSUVIS and INVELTYS reaching specified thresholds between **$50 million** and **$250 million** in calendar years from 2023 to 2029[150](index=150&type=chunk) - No milestone payments have been received to date, and there is no assurance regarding the timing or amount of future payments, if any[150](index=150&type=chunk) [Registered Offerings](index=48&type=section&id=Registered%20Offerings) The company has a $350 million shelf registration and raised $7.0 million net from at-the-market offerings from January 2023 to March 2025, with no sales in Q1 2025 or Q1 2024 - The company has a **$350 million** shelf registration (2023 Shelf Registration) for various securities, including common stock, preferred stock, and warrants[151](index=151&type=chunk) - From January 2023 to March 31, 2025, the company sold **784,196** shares of common stock under an at-the-market offering, generating **$7.0 million** in net proceeds. No shares were sold in Q1 2025 or Q1 2024[152](index=152&type=chunk) [Loan Agreement](index=49&type=section&id=Loan%20Agreement) The company has a $29.3 million term loan with Oxford Finance, with extended amortization and maturity dates following a $5 million prepayment, secured by assets and subject to covenants - The company has a term loan with Oxford Finance, with an aggregate principal amount of **$29.3 million** outstanding as of March 31, 2025[172](index=172&type=chunk)[217](index=217&type=chunk) - Following a **$5 million** prepayment in December 2024, the amortization date was extended to July 1, 2025, and the maturity date to November 1, 2026. A further **$2.5 million** prepayment by June 30, 2025, could extend these dates to January 1, 2026, and May 1, 2027, respectively[156](index=156&type=chunk)[157](index=157&type=chunk) - The loan is secured by substantially all of the company's assets and includes customary representations, warranties, and affirmative/negative covenants, such as restrictions on incurring future debt, granting liens, and distributing dividends[154](index=154&type=chunk)[185](index=185&type=chunk) [Private Placements](index=51&type=section&id=Private%20Placements) The company completed several private placements, issuing preferred and common stock, generating aggregate gross proceeds of $33.849 million from December 2023 to December 2024 | Private Placement Date | Securities Issued | Gross Proceeds (in thousands) | | :--------------------- | :---------------- | :---------------------------- | | December 21, 2023 | Series F Preferred Stock | $2,000 | | March 25, 2024 | Series G Preferred Stock | $8,600 | | June 26, 2024 | Common Stock & Series H Preferred Stock | $12,499 | | December 29, 2024 | Common Stock & Series I Preferred Stock | $10,750 | | Total | | $33,849 | [CIRM Award](index=51&type=section&id=CIRM%20Award) Combangio received a $15 million CIRM grant for KPI-012, with $13.9 million disbursed by April 2025, and the award includes royalty obligations on net sales - Combangio received a **$15 million** grant from CIRM to support the KPI-012 program for PCED[167](index=167&type=chunk) - As of April 2025, **$13.9 million** has been disbursed, including **$2.3 million** in April 2025. The remaining **$1.1 million** is contingent on achieving specified milestones[167](index=167&type=chunk)[120](index=120&type=chunk) - The CIRM Award includes royalty obligations on net sales of any product resulting from the award (**0.1%** per **$1 million** utilized funds until **9x** award amount is paid, then **1.0%** on net sales over **$500 million**/year)[136](index=136&type=chunk)[137](index=137&type=chunk) [Combangio Acquisition](index=51&type=section&id=Combangio%20Acquisition) The Combangio acquisition includes potential contingent consideration of up to $105 million in milestones, with $2.5 million cash and $2.4 million stock paid for the first dosing milestone - The Combangio acquisition includes potential contingent consideration of up to **$40 million** for development, regulatory, and commercialization milestones, and an additional **$65 million** for future sales-based milestones[168](index=168&type=chunk) - Following the first dosing milestone in February 2023, **$2.5 million** in cash and **$2.4 million** in common stock (**105,038** shares) were paid to former Combangio Equityholders, with the remaining **$0.1 million** paid in January 2024[170](index=170&type=chunk) [Other Contractual Obligations](index=53&type=section&id=Other%20Contractual%20Obligations) Material cash requirements primarily relate to the Stanford University license agreement and operating lease liabilities - Other material cash requirements primarily relate to the license agreement with Stanford University and operating lease obligations[171](index=171&type=chunk) [Cash Flows](index=53&type=section&id=Cash%20Flows) Net cash used in operating activities decreased in Q1 2025, while financing activities shifted from providing to using cash, resulting in a larger net decrease in cash and cash equivalents | Cash Flow Activity | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended March 31, 2024 (in thousands) | Change (in thousands) | | :-------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | | Net cash used in operating activities | $(8,824) | $(10,844) | $2,020 | | Net cash used in investing activities | $0 | $(13) | $13 | | Net cash (used in) provided by financing activities | $(135) | $8,440 | $(8,575) | | Net decrease in cash and cash equivalents | $(8,959) | $(2,417) | $(6,542) | - Net cash used in operating activities decreased by **$2.0 million** in Q1 2025, primarily due to a **$2.5 million** decrease in net loss (adjusted for non-cash charges) and working capital fluctuations, including a **$2.3 million** CIRM receivable[174](index=174&type=chunk) - Net cash used in financing activities was **$0.1 million** in Q1 2025, primarily for issuance costs related to the December 2024 private placement. In Q1 2024, financing activities provided **$8.4 million** from the Series G preferred stock sale[176](index=176&type=chunk)[177](index=177&type=chunk) [Funding Requirements and Going Concern](index=54&type=section&id=Funding%20Requirements%20and%20Going%20Concern) R&D and G&A expenses are expected to increase, and existing cash is insufficient to complete KPI-012 development, raising substantial doubt about going concern without additional funding - Research and development expenses are expected to increase substantially due to the clinical development of KPI-012 and preclinical studies for KPI-014. General and administrative expenses will also increase significantly upon commercialization[178](index=178&type=chunk)[179](index=179&type=chunk) - Cash and cash equivalents of **$42.2 million** as of March 31, 2025, are expected to fund operations into Q1 2026, but are insufficient to complete KPI-012 clinical development[180](index=180&type=chunk)[209](index=209&type=chunk) - The company has identified conditions that raise substantial doubt about its ability to continue as a going concern and plans to seek additional funding through equity, debt, or collaborations[181](index=181&type=chunk)[203](index=203&type=chunk)[206](index=206&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=60&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risk is interest rate fluctuations on the $29.3 million floating-rate term loan, but a 10% SOFR change would not materially impact operating results - The company's financial instruments primarily consist of cash equivalents (money market accounts and U.S. treasury securities with maturities less than 90 days) and a **$29.3 million** floating-rate term loan[190](index=190&type=chunk)[191](index=191&type=chunk) - An immediate **10%** change in the 1-Month CME Term SOFR rate would not have a material impact on the company's operating results or cash flows due to the short-term nature of cash equivalents and the loan's interest rate structure[190](index=190&type=chunk)[191](index=191&type=chunk) [Item 4. Controls and Procedures](index=60&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of disclosure controls and procedures and reports on changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=60&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025 - As of March 31, 2025, the company's management, with the participation of the interim CEO and CFO, evaluated and concluded that disclosure controls and procedures were effective at the reasonable assurance level[192](index=192&type=chunk) [Changes in Internal Control over Financial Reporting](index=60&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during Q1 2025 - No changes in internal control over financial reporting occurred during the three-month period ended March 31, 2025, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[193](index=193&type=chunk) [PART II – OTHER INFORMATION](index=42&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any material legal proceedings - The company is not currently subject to any material legal proceedings[195](index=195&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) This section outlines various risks, including financial position, product development, commercialization, third-party dependence, intellectual property, regulatory approval, employee matters, and common stock - The company has incurred significant losses and negative cash flows since inception, with an accumulated deficit of **$676.9 million** as of March 31, 2025, raising substantial doubt about its ability to continue as a going concern[197](index=197&type=chunk)[203](index=203&type=chunk) - The company is substantially dependent on the success of its product candidate, KPI-012, and faces risks related to completing clinical development, obtaining marketing approval, and achieving market acceptance[228](index=228&type=chunk)[229](index=229&type=chunk)[253](index=253&type=chunk) - Significant risks include the need for substantial additional funding, potential delays or failures in clinical trials, intense competition from major pharmaceutical companies, reliance on third parties for clinical trials and manufacturing, and challenges in obtaining and maintaining intellectual property protection[207](index=207&type=chunk)[232](index=232&type=chunk)[271](index=271&type=chunk)[279](index=279&type=chunk)[284](index=284&type=chunk)[311](index=311&type=chunk) [Risks Related to Our Financial Position and Need for Additional Capital](index=62&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Need%20for%20Additional%20Capital) The company faces significant losses, going concern doubts, and the need for additional funding, with substantial indebtedness and uncertain milestone payments from Alcon - The company has incurred significant losses and negative cash flows since inception, with a net loss of **$8.9 million** in Q1 2025 and an accumulated deficit of **$676.9 million** as of March 31, 2025[197](index=197&type=chunk) - Conditions and events raise substantial doubt about the company's ability to continue as a going concern, requiring substantial additional funding through equity, debt, or collaborations[203](index=203&type=chunk)[206](index=206&type=chunk)[207](index=207&type=chunk) - The company's **$29.3 million** indebtedness may limit cash flow, and failure to comply with loan covenants (e.g., Nasdaq listing) could accelerate amounts due. Milestone payments from Alcon (up to **$325 million**) are subject to significant risks and uncertainties, with no payments received to date[217](index=217&type=chunk)[220](index=220&type=chunk)[221](index=221&type=chunk) [Risks Related to Product Development](index=73&type=section&id=Risks%20Related%20to%20Product%20Development) Success depends on KPI-012, with high risks of clinical trial failure, delays, adverse effects, and limited resources, potentially requiring additional costly trials - The company is substantially dependent on the success of KPI-012, and its development involves high risks, including potential failure to demonstrate potency, safety, and purity in clinical trials[228](index=228&type=chunk)[232](index=232&type=chunk) - Delays or difficulties in patient enrollment for clinical trials, especially for rare conditions like PCED, could prevent or delay regulatory approvals[238](index=238&type=chunk)[239](index=239&type=chunk) - Identification of serious adverse effects or unexpected characteristics during development could lead to abandonment or limitation of development efforts. The company's limited resources mean it may forego more profitable opportunities[241](index=241&type=chunk)[242](index=242&type=chunk) - Data from clinical trials conducted outside the United States (e.g., Mexico, Latin America) may not be accepted by the FDA, potentially requiring additional costly and time-consuming trials[244](index=244&type=chunk)[249](index=249&type=chunk) [Risks Related to the Commercialization of our Product Candidates](index=81&type=section&id=Risks%20Related%20to%20the%20Commercialization%20of%20our%20Product%20Candidates) Commercialization faces risks of market acceptance failure, inadequate reimbursement, intense competition, and adverse impacts from changes in U.S. trade policy - Even if approved, KPI-012 may fail to achieve market acceptance, adequate formulary coverage, pricing, or reimbursement, and the estimated market opportunity for PCED may be smaller than anticipated[253](index=253&type=chunk)[255](index=255&type=chunk)[256](index=256&type=chunk)[257](index=257&type=chunk) - Establishing and maintaining sales, marketing, and distribution capabilities is expensive and time-consuming, and the company may not be successful in commercializing products on its own or through third-party agreements[265](index=265&type=chunk)[266](index=266&type=chunk)[270](index=270&type=chunk) - The company faces substantial competition from major pharmaceutical companies and existing products (e.g., Oxervate for NK), which could develop safer, more effective, or less expensive products, reducing the company's commercial opportunity[271](index=271&type=chunk)[272](index=272&type=chunk)[275](index=275&type=chunk)[276](index=276&type=chunk) - Changes in U.S. trade policy, including tariffs on pharmaceuticals, could negatively impact costs of materials, production processes, and supply chains, potentially delaying development and commercialization[250](index=250&type=chunk)[252](index=252&type=chunk) [Risks Related to Our Dependence on Third Parties](index=90&type=section&id=Risks%20Related%20to%20Our%20Dependence%20on%20Third%20Parties) Reliance on third parties for clinical trials and manufacturing poses risks of delays, non-compliance, supply issues, and potential loss of CIRM funding due to unmet conditions - The company relies on third parties (CROs, medical institutions) to conduct clinical trials, and their unsatisfactory performance or non-compliance could delay or prevent marketing approvals[279](index=279&type=chunk)[281](index=281&type=chunk) - The company contracts with third parties for manufacturing KPI-012, a complex biologic. Reliance on these manufacturers carries risks of insufficient quantities, production difficulties, raw material shortages, and non-compliance with cGMP regulations, which could delay development or commercialization[284](index=284&type=chunk)[285](index=285&type=chunk)[286](index=286&type=chunk)[291](index=291&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk) - Reliance on CIRM funding for KPI-012 involves compliance obligations, co-funding requirements, and royalty payments. Failure to meet milestones or comply with terms could result in loss of funding or default under the Loan Agreement[297](index=297&type=chunk)[298](index=298&type=chunk)[300](index=300&type=chunk) [Risks Related to Our Intellectual Property](index=100&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) Success depends on obtaining and maintaining patent protection for KPI-012, facing risks of patent challenges, litigation costs, and government rights from funding - The company's success depends on obtaining and maintaining patent protection for its technology and product candidates, including KPI-012, which is an expensive, time-consuming, and uncertain process[311](index=311&type=chunk)[313](index=313&type=chunk)[314](index=314&type=chunk) - The company relies on exclusively licensed patent rights for KPI-012 (e.g., from Stanford University). Termination of these agreements or failure to maintain/enforce underlying patents would harm its competitive position[328](index=328&type=chunk)[330](index=330&type=chunk) - Intellectual property litigation is expensive, time-consuming, and could distract management, potentially leading to invalidation of patents or substantial liabilities for infringement claims[321](index=321&type=chunk)[324](index=324&type=chunk)[326](index=326&type=chunk)[348](index=348&type=chunk) - Intellectual property developed with government funding (e.g., Bayh-Dole Act, CIRM) may be subject to government rights like non-exclusive licenses, march-in rights, or domestic manufacturing requirements, which could limit exclusive rights and increase costs[332](index=332&type=chunk)[333](index=333&type=chunk)[301](index=301&type=chunk) [Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance Matters](index=111&type=section&id=Risks%20Related%20to%20Regulatory%20Approval%20of%20Our%20Product%20Candidates%20and%20Other%20Legal%20Compliance%20Matters) Regulatory approval is uncertain, with post-marketing oversight, biosimilar competition, complex healthcare laws, and privacy risks posing significant compliance and financial threats - Obtaining regulatory approval for product candidates is expensive, time-consuming, and uncertain, and failure to do so would prevent commercialization and materially impair revenue[350](index=350&type=chunk)[352](index=352&type=chunk)[355](index=355&type=chunk)[363](index=363&type=chunk) - Approved products are subject to significant post-marketing regulatory requirements, including ongoing surveillance, cGMP compliance, and potential REMS. Improper promotion of off-label uses could lead to substantial liability[369](index=369&type=chunk)[370](index=370&type=chunk)[373](index=373&type=chunk) - Orphan drug exclusivity (e.g., for KPI-012 for PCED) may not prevent competing products, and regulatory designations (Fast Track, Breakthrough Therapy) do not guarantee faster development or approval. Biosimilar competition is a risk for biologics[377](index=377&type=chunk)[379](index=379&type=chunk)[380](index=380&type=chunk)[390](index=390&type=chunk)[392](index=392&type=chunk)[394](index=394&type=chunk) - The company is subject to complex healthcare laws (Anti-Kickback Statute, False Claims Act, HIPAA) and anti-corruption laws (FCPA, Bribery Act), with non-compliance potentially leading to criminal sanctions, civil penalties, and reputational harm[397](index=397&type=chunk)[398](index=398&type=chunk)[431](index=431&type=chunk)[432](index=432&type=chunk)[436](index=436&type=chunk) - Existing and future legislation (ACA, IRA) and disruptions at government agencies (FDA, CMS) could affect commercialization, pricing, reimbursement, and approval timelines. Stringent privacy laws (GDPR, CCPA) and data security risks pose significant compliance and financial threats[400](index=400&type=chunk)[409](index=409&type=chunk)[410](index=410&type=chunk)[413](index=413&type=chunk)[419](index=419&type=chunk)[420](index=420&type=chunk)[438](index=438&type=chunk)[450](index=450&type=chunk)[456](index=456&type=chunk) [Risks Related to Employee Matters](index=147&type=section&id=Risks%20Related%20to%20Employee%20Matters) Success depends on retaining key personnel, attracting talent, and managing cyber-attack vulnerabilities and remote workplace risks - The company's future success is highly dependent on retaining key executives (e.g., Todd Bazemore, Mary Reumuth, Kim Brazzell, Darius Kharabi) and attracting/retaining qualified scientific, clinical, and management personnel[461](index=461&type=chunk)[462](index=462&type=chunk) - Internal computer systems and those of vendors are vulnerable to cyber-attacks, viruses, and unauthorized access, which could lead to material disruptions in product development, loss of proprietary information, and significant remediation costs[463](index=463&type=chunk)[464](index=464&type=chunk)[465](index=465&type=chunk) - A partially or fully remote workplace environment could negatively impact employee productivity, training, technology resources, and heighten operational and security risks[466](index=466&type=chunk) [Risks Related to Our Common Stock](index=150&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) Common stock faces risks of Nasdaq delisting, price volatility, dilution from share sales and preferred stock conversions, and significant influence from a large stockholder - Failure to comply with Nasdaq's continued listing requirements (e.g., **$1.00** minimum bid price, **$2.5 million** minimum stockholders' equity) could lead to delisting, reducing liquidity and access to capital, and triggering an event of default under the Loan Agreement[467](index=467&type=chunk)[468](index=468&type=chunk)[474](index=474&type=chunk) - The company's stock price is volatile and fluctuates substantially due to factors like clinical trial results, regulatory approvals, competition, and financial performance[479](index=479&type=chunk) - Sales of a substantial number of common stock shares, including those from private placements and equity compensation plans, could significantly depress the market price[481](index=481&type=chunk)[482](index=482&type=chunk)[484](index=484&type=chunk) - Existing preferred stock (Series E, F, G, H, I) is convertible into common stock, potentially causing dilution. A large stockholder (Baker Brothers) holds significant influence over business decisions and stockholder approvals due to its ownership and contractual rights[486](index=486&type=chunk)[487](index=487&type=chunk)[488](index=488&type=chunk)[489](index=489&type=chunk)[490](index=490&type=chunk) - As a "smaller reporting company," the company benefits from reduced disclosure requirements, which might make its common stock less attractive to some investors. Operating as a public company incurs significant legal, accounting, and compliance costs[491](index=491&type=chunk)[492](index=492&type=chunk)[493](index=493&type=chunk) [General Risk Factors](index=160&type=section&id=General%20Risk%20Factors) General risks include adverse impacts from changes in tax laws (e.g., 2017 Tax Act, IRA), which could affect corporate tax rates, NOL utilization, and introduce new taxes. Patent reform legislation (Leahy-Smith America Invents Act) could increase uncertainties and costs in patent prosecution and litigation, particularly with the Patent Trial and Appeals Board (PTAB) facilitating challenges to patent validity - Changes in tax laws (e.g., 2017 Tax Act, IRA) could adversely affect the company's business and financial condition by impacting corporate tax rates, limiting NOL deductions, and introducing new taxes like the one percent excise tax on stock repurchases[501](index=501&type=chunk)[502](index=502&type=chunk)[503](index=503&type=chunk) - Patent reform legislation, such as the Leahy-Smith America Invents Act, and the establishment of the Patent Trial and Appeals Board (PTAB), could increase uncertainties and costs associated with patent prosecution, enforcement, and defense, potentially leading to more challenges to patent validity[504](index=504&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=104&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports no unregistered sales of equity securities or specific use of public offering proceeds during the reporting period [Sales of Unregistered Securities](index=162&type=section&id=Sales%20of%20Unregistered%20Securities) The company did not sell any unregistered equity securities or grant any unregistered stock options, restricted stock units, or restricted stock awards during the reporting period - The company did not sell any unregistered equity securities or grant any unregistered stock options, restricted stock units, or restricted stock awards during the period covered by this Quarterly Report on Form 10-Q that were not previously described[505](index=505&type=chunk) [Use of Proceeds from our Public Offering of Common Stock](index=162&type=section&id=Use%20of%20Proceeds%20from%20our%20Public%20Offering%20of%20Common%20Stock) No information provided regarding the use of proceeds from public offerings of common stock - No information provided regarding the use of proceeds from public offerings of common stock[506](index=506&type=chunk) [Repurchase of Shares or of Company Equity Securities](index=162&type=section&id=Repurchase%20of%20Shares%20or%20of%20Company%20Equity%20Securities) The company did not repurchase any shares or company equity securities during the reporting period - The company did not repurchase any shares or company equity securities during the period covered by this Quarterly Report on Form 10-Q[507](index=507&type=chunk) [Item 5. Other Information](index=104&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter - No directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarterly period covered by this report[508](index=508&type=chunk) [Item 6. Exhibits](index=105&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and various Inline XBRL documents - The exhibits include certifications from the Interim Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and various Inline XBRL documents (Exhibits 101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[509](index=509&type=chunk) [SIGNATURES](index=106&type=section&id=SIGNATURES) The report is duly signed by Todd Bazemore, Interim CEO, President and COO, and Mary Reumuth, CFO, on May 14, 2025 - The report is signed by Todd Bazemore, Interim Chief Executive Officer, President and Chief Operating Officer, and Mary Reumuth, Chief Financial Officer, on May 14, 2025[513](index=513&type=chunk)

Financial Performance - As of March 31, 2025, KALA BIO reported cash and cash equivalents of $42.2 million, down from $51.2 million as of December 31, 2024, reflecting cash used in operations[7]. - KALA's net loss for the first quarter of 2025 was $8.9 million, or $1.41 per share, compared to a net loss of $11.8 million, or $4.20 per share, for the same period in 2024[11]. - KALA's total operating expenses for Q1 2025 were $10.7 million, compared to $11.9 million for the same period in 2024[11]. - KALA's total stockholders' equity decreased to $5.7 million as of March 31, 2025, from $12.3 million as of December 31, 2024[14]. Expenses - General and administrative expenses decreased to $4.6 million in Q1 2025 from $5.4 million in Q1 2024, primarily due to reduced employee-related costs[11]. - Research and development expenses for Q1 2025 were $6.1 million, down from $6.4 million in Q1 2024, mainly due to decreased medical affairs-related costs for KPI-012[11]. Clinical Trials and Development - KALA is currently enrolling patients in the Phase 2b CHASE trial for KPI-012, targeting topline data in the third quarter of 2025[5]. - The company activated clinical trial sites in Latin America for the CHASE trial, contingent on positive results[5]. Market Opportunity - KPI-012 addresses Persistent Corneal Epithelial Defect (PCED), which has an estimated incidence of approximately 100,000 patients in the U.S., representing a significant market opportunity[5]. - KALA is exploring the potential of KPI-012 for additional rare ocular diseases, including Limbal Stem Cell Deficiency (LSCD), which also has an estimated incidence of 100,000 patients in the U.S.[5].